Open account debt Sample Clauses

Open account debt. (i) In general. All advances and repayments on open account debt (as described in paragraph (a)(2)(i) of this section) during the S corporation’s taxable year are netted at the close of the S corporation’s tax- able year to determine the amount of any net advance or net repayment. The net advance or net repayment is com- bined with the outstanding aggregate principal balance of the existing open account debt and that amount is car- ried forward to the beginning of the subsequent taxable year as the out- standing aggregate principal amount of the open account debt (unless the ag- gregate principal amount meets the ex- ception defined in paragraph (a)(2)(ii) of this section at the close of the tax- able year). However, if the shareholder in the S corporation is not a share- holder of the S corporation at the close of the S corporation’s taxable year, such advances and repayments on open account debt are netted, and the basis of that indebtedness is restored under paragraph (c) of this section, effective immediately before the shareholder terminates his or her interest in the S corporation. If any open account debt is disposed of before or upon the close of the taxable year, the disposition is effective at the close of the S corpora- tion’s taxable year, and all advances and repayments are netted imme- diately prior to the disposition and the basis of that indebtedness is restored under paragraph (c) of this section, ef- fective at the close of the S corpora- tion’s taxable year.
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